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LevelUp is yet another Groupie – a Groupon clone. In their website copy and videos they go after Groupon. Look at their use of Groupon logo but with the words Daily Deal.

LevelUp says they address the biggest problem of Groupon and other Daily Deal sites – People buy the “ridiculously large discount”, try it once and never come back.

LevelUp say they have solved the problem for small businesses with their model – Level Up. People Try (Level 1), Like It (Level 2) and Love It (Level 3).

LevelUp puts money behind this claim as well – they do not get paid unless people move up the level. So should your business do it?

I do not understand the subtle different between Like and Love. But that bigger question is how do those who try the discounted coupon move to higher levels? With bigger and better coupons.

The deal levels are called Good, Better and Best. They tell their subscribers,

“Had a great time? Then “level-up” and go back with an even better deal!

So they incentivize people to go back by giving them BIGGER discounts than the first time.

In other words, those who try with discounted coupon do not become a regular customer who is happy to pay full price but just a regular drain on profit.

Anyone can BUY loyalty by giving away price discounts. What will happen if the promotion is withdrawn? What is the cost of that FALSE loyalty?

LevelUp still does not address the key problem – How can a small business convert the deal seeker attracted by steep price discount into a full price customer?

In the case of Groupon and LivingSocial, I discuss their role as a Marketing Channel and Sales Channel. As a Sales Channel all these sites are very good ways to off-load excess capacity that cannot be inventoried and businesses can protect against cannibalization.

In case of LevelUp it can never be a Sales Channel with its increasing discount levels. Your business can hire LevelUp only as a Marketing Channel – which requires you to do the hard math before accepting their promise of Delivering Loyal Customers.